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Employee Leasing in South Africa

Thanks to its strategic location at the southern cape of Africa, its membership in the BRICS group of emerging economies, and its integration in the African Continental Free Trade Area, South Africa offers great business potential for companies wishing to expand their activity into the African continent. The country has one of the best road, logistics, and communication infrastructures in Africa and already hosts hundreds of multinationals, many of which use it as a regional hub.

One of the simplest ways for companies to practically measure their business potential in South Africa is to hire local employees through employee leasing. This service allows businesses to enter the South African market without the need for setting up a local legal entity. It also allows company leaders to give their undivided attention to their growth strategy and not worry about the day-to-day administrative management of employees.

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Stephan Dorn FMC Group

Content:

  • Advantages of Employee Leasing in South Africa
  • Employee Leasing Services Offered by FMC Group
  • Advantages of the South African Market
  • Recruitment in South Africa
    • Minimum Wage and Payroll
    • Social Contributions and Taxes
    • Working Hours and Overtime
    • Vacation Days
    • Parental Leave and Sick leave
    • Notice Period

Advantages of Employee Leasing in South Africa

  • Outstaffing to South Africa through employee leasing allows clients to quickly expand their activity into South Africa and reach the large African consumer market, thanks to the African Continental Free Trade Area (AfCFTA).
  • Employee leasing gives businesses much-needed flexibility and reduces the financial and time costs of expanding into a new market.
  • Employee leasing helps clients delegate the administrative side of employee management in order to focus all their energy into business decisions that contribute directly to growth.

Employee Leasing Services Offered by FMC Group

  • Selection of candidates according to the client’s needs and criteria;
  • Recruitment of the best candidates after the client’s approval and negotiation of the employment contract;
  • Management of the payroll according to international standards;
  • Payment of social contributions and taxes in accordance with the South African labor law;
  • Payment of other expenses and allowances on behalf of the client;
  • Monitoring of paid leaves and employee vacations according to the employment contract;
  • Negotiation and implementation of private insurance for employees if requested;
  • Continuous communication with the client in regards to the management of their employees.

Management and Reporting Flow of Employee Leasing Services

Management and Reporting Flow Chart

Advantages of the South African Market

  • South Africa is one of the most promising emerging markets in the world. The country is a member of the BRICS economic group (Brazil, Russia, India, China, and South Africa) and it enjoys a highly privileged position in the global trade system, thanks to its strategic location.
  • While most African economies are heavily-based on agriculture, South Africa enjoys a highly-diversified economy where the manufacturing and service sectors are thriving. The tertiary sector – notably finance and business services, trade, catering, and accommodation services, and transport, storage and communication services – contributes to around two-thirds of South Africa’s GDP, while the industry sector makes up about 30% of it, making the country one of the most industrialized in the continent.
  • South Africa hosts more multinational corporations than any other African country, thanks to its supportive ecosystem. Foreign businesses consider the country a hub for innovation, tech, and fintech. In 2020, South Africa recorded over USD 3.2 billion in foreign direct investments.
  • Expanding into South Africa allows businesses to benefit from the AfCFTA and gives them access to a market of more than 1.2 billion consumers. South Africa was one of the first countries to ratify the AfCFTA and to express its willingness to make the agreement operational.
  • South Africa has one of the most advanced information and technology infrastructures in Africa, making it an attractive destination for investment in the IT sector. The country also boasts world-class air, maritime, and road infrastructure.

Recruitment in South Africa

Minimum Wage and Payroll

  • The minimum wage in South Africa is set at ZAR 23.19 (around EUR 1.40) per hour.
  • There is no set payroll cycle in South Africa. It depends on the agreement between the employer and employee and it can be weekly, biweekly, or monthly.
  • The 13th-month salary bonus is not mandatory but it is customary in South Africa. It is typically paid in December.

Social Contributions and Taxes

Employer Contributions
Skills Development Levy 1%
Unemployment Insurance 1%
Total 2%
Employee Contributions
Unemployment Insurance 1%
Total 1%
Employee Income Tax
Up to ZAR 226,000 per year 18%
Between ZAR 226,001 and ZAR 353,100 ZAR 40,680

+ 26% of the amount over ZAR 226,000

Between ZAR 353,101 and ZAR 488,700 ZAR 73,726

+ 31% of the amount over ZAR 353,100

Between ZAR 488,701 and ZAR 641,400 ZAR 115,762

+ 36% of the amount over ZAR 488,700

Between ZAR 641,401 and ZAR 817,600 ZAR 170,734

+ 39% of the amount over ZAR 641,400

Between ZAR 817,601 and ZAR 1,731,600 ZAR 239,452

+ 41% of the amount over ZAR 817,600

From ZAR 1,731,601 ZAR 614,192

+ 45% of the amount over ZAR 1,731,600

 

Working Hours and Overtime

  • Working hours in South Africa cannot exceed 45 hours per week and nine hours per day.
  • Overtime pay is compulsory if the working hours limit is exceeded. Overtime work cannot exceed 10 hours per week.
  • Overtime work is paid at a rate of 150% of the regular salary on normal working days and 200% on weekends and public holidays.
  • Employees who earn more than ZAR 205,433.30 (around EUR 12,250) annually are not entitled to overtime compensation.

Vacation Days

  • Employees in South Africa are entitled to 15 days of paid vacation per year.
  • South Africa celebrates 12 public holidays:
    • New Year’s Day: January 1st
    • Human Rights Day: March 21st
    • Good Friday: Between late March and late April
    • Family Day: April 18th
    • Freedom Day: April 27th
    • Labor Day: May 1st
    • Youth Day: June 16th
    • National Women’s Day: August 9th
    • Heritage Day: September 24th
    • Day of Reconciliation: December 16th
    • Christmas Day: December 25th
    • Day of Goodwill: December 26th

Parental Leave and Sick Leave

  • Female employees in South Africa are entitled to four months of unpaid maternity leave. The leave can be taken from four weeks before the due date and the employee cannot return to work for at least six weeks after delivery. The Unemployment Insurance Fund can compensate a maximum of 60% of the employee’s regular salary during maternity leave. The payments are made for a maximum duration of 121 days.
  • New parents can take up to 10 days of unpaid parental leave after the birth of their child.
  • Employees in South Africa are entitled to between 30 and 36 days of paid sick leave per year after their first six months of service. The duration of the paid sick leave depends on the employee’s working hours. Employees who work less than 24 hours a month are not entitled to paid sick leave. The number of sick leave days is calculated on a three-year cycle and can carry on from year to year until it gets reset after the third year. Employers have to pay 100% of their employees’ salaries during paid sick leaves.
  • If the employer agrees during the hiring process, working students can take two days of paid leave per subject per year, up to a maximum of 10 days. Additional study leaves past 10 days can be taken as unpaid leaves.
  • Employees who are injured at work and need more than four days of leave are entitled to 75% of their regular pay for up to three months, covered by the employer. Afterward, they have to request a similar compensation from the South African Compensation Fund. Employers have the right to request payment from the Compensation Fund for the first three months as well.

Notice Period

  • Employees with less than six months of service have to give a one-week notice before leaving their job.
  • Between six months and one year of service, employees have to give a two weeks notice.
  • From the second year of service, employees have to notify their employers four weeks before leaving.

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.